Insulin stores lipid in adipocytes and prevents lipolysis and the release of non-esterified fatty acids (NEFA). Excessive release of NEFA during sustained energy supply and increase in abdominal adiposity trigger systemic insulin resistance, including in the liver, a major site of insulin clearance. This causes a reduction in insulin clearance as a compensatory mechanism to insulin resistance in obesity. On the other hand, reduced insulin clearance in the liver can cause chronic hyperinsulinemia, followed by downregulation of insulin receptor and insulin resistance. Delineating the cause–effect relationship between reduced insulin clearance and insulin resistance has been complicated by the fact that insulin action and clearance are mechanistically linked to insulin binding to its receptors. This review discusses how NEFA mobilization contributes to the reciprocal relationship between insulin resistance and reduced hepatic insulin clearance, and how this may be implicated in the pathogenesis of non-alcoholic fatty liver disease.